Siemens Former Executive Admits The Use Of Secret Illicit Funds For Bribery

May 26, 2008 11:42 a.m. EST

Munich, Germany (AHN) - The 57-year-old former Siemens AG manager Reinhardt Siekaczek on the first trial related to a wideranging corruption scandal admitted on Monday that illicit commissions were paid to secure orders.

Siekaczek told a Munich court that he organized a slush-fund system at Europe's largest engineering company, which was later used to bribe customers.

However, he refused of deriving any benifts from the system or of receiving bonus payments for his actions.

Siekaczek, who used to work as an executive at the firm's ICN fixed-line communications division until 2004, is charged with 58 counts of breach of trust.

The corruption scandal came to light last year and the amount of money allegedly misused has been reportedly to be around $2 billion (1.3 billion euros), which the company has acknoledged in the wider corruption case.

After the case was uncovered in late 2006, the payments from the slush funds have been closely watched by the financial authorities in different countries including the Securities and Exchange Commission in the U.S.

He also insisted in the court on Monday that his superiors knew of the funds.

"The whole sectoral management was naturally informed that this function was carried out by me," Siekaczek was quoted saying by AP news agency.

"Naturally it was known to me and everyone that we pay commissions to secure orders," he continued, adding that they were being handled "very discreetly" with only a very small circle of people in the know.

After the scandal was revealed, chief executive, Klaus Kleinfeld, and former chief executive and chairman, Heinrich von Pierer, -- who will appear as witnesses in the trial -- were removed from their positions.

According to the prosecutors, Siekaczek allegedly set up a complex network of shell corporations that he used to organize to raise and siphon off company money for bribes over several years.

The system of phony consultant contracts, which was asked by his managers in 2002 according to Siekaczek, was used to generate money for commissions and to help secure contracts abroad.

Shares of Siemens gained in Frankfurt by 0.06 percent to 71.50 euros ($112.56) over the news from the on-going trail, which began on Monday and will last for 15 days over nine weeks.

The stock of the company has already dropped by 4.5 percent after corruption and bribery scandal was revealed on November 15, 2006.